I have been a CPA for over 30 years focusing on taxation. I have extensive experience with partnerships, real estate and high net worth individuals.
My ideology can be summarized at least metaphorically by this quote:
"I have a total irreverence for anything connected with society except that which makes the roads safer, the beer stronger, the food cheaper and the old men and old women warmer in the winter and happier in the summer." - Brendan Behan
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Timothy Smith writes The Echo Boom Bomb, a blog featuring financial, economic and socioeconomic analysis of the Millennial generation (also known as Echo Boom Generation or Generation Y). The Echo Boomers or Millennials are people born between 1982 and 1995. Mr. Smith currently advises corporations and organizations on how to market products, services and ideas to the Millennial generation. Mr. Smith recently interviewed Natalia Antonova, who is having trouble paying her student loans. Student loans were one of the major grievances noted by Occupy Wall Street.

“Interview: “I Can’t Afford My Private Student Loans”

I claim that an education bubble is growing, and one key that will lead to it’s eventual collapse will be the stories that the current generation tell to the next generation. Was school worth it? Many in Generation Y have said that it isn’t. One Generation Yer, Natalia Antonova, recently wrote about having trouble paying back her private student loans. A brief bio directly from her: “I was born in the USSR, in Kiev. My family is mostly ethnically Russian. We moved to the United States in the mid-1990′s. In 2007, I went to seek my fortune abroad (wisely so, as it turns out). I work as a journalist, a playwright and a translator.” Natalia owes $42,000 in private loans (with accrued interest, not the principal amount) and another $30,000 in federal loans.

1. I read your story that you finished school with a large student loan debt load and after making numerous payments since 2006, the balanced hasn’t decreased much. What are you doing now with this student loan balance and what made you decide this?

Right now I can only afford to concentrate on my federal loans – I can no longer afford my private loans, and am sliding into default. My federal loans were consolidated through the College Foundation of North Carolina, an organization that, I believe, actually contributes to society in tangible ways, so I am doing everything in my power to keep up with those loans. Defaulting on federal loans also carries consequences which are even harsher than a private loan default.

I don’t plan on being broke forever, and hope to work something out with regard to my private loans, eventually, but keeping up with my monthly payments is not feasible at this time. Forbearance, meanwhile, is just designed to push you further into debt – it’s a sick joke, when you think about it. I just can’t participate in this charade at this time, especially after taking huge risks with my health to avoid defaulting in the past. It has dawned on me that I am a serf to this system, and I can no longer play this game.

I actually didn’t think that I would need to borrow so much money for school – my family was doing alright when I was applying to universities. But when our financial problems began, the reversal of fortune was pretty swift and merciless. I gambled on my Duke education – and in one sense, I won. I do, in fact, have a great career now. But even this great career can’t make up for the fact that I’m stuck making these payments while having practically zero consumer protections – and I’m feeding a beast that’s destroying people’s lives. Since I went public with my loan problems, I’ve had people writing me and saying things like, “My brother defaulted – and killed himself. Creditors started harassing our mother after his death.” Or someone will write in to say, “My daughter is forced to leave the country, she can’t keep up with her payments, and I’m partially disabled, I can’t help out.” What’s happening to people out there is horrible – and when we advise children on what to do after high school, we should be keeping that in mind.

2. In the United States, we’ve told kids to go to college no matter the cost. If students don’t have the money, we encourage them to borrow money because they’ll make more money if they go to school. I’m assuming here that you heard some similar advice. Now that you’ve been through school, and with your student loan balance, how do you feel about that advice now?

I think this advice is a double-edged sword. On one hand, you have to be realistic – having a college education is usually the only way to have a decent career in the States right now. But on the other hand, costs are ridiculously inflated and the job market for new graduates is awful.

You keep hearing these “miracle” stories about people who didn’t have an education and totally made it – but I think those stories are means of pacifying people. In the current volatile job market, with the economy suffering, with many graduates unemployed and underemployed, how does one keep pretending that there isn’t something horribly wrong with our system? Well, one way to avoid that discussion is just to tell people, “You’re just lazy. If Steve Jobs had a great career – so can you!” By doing so, we can keep sweeping systemic problems with the education system and the economy under the rug. With all due respect – people like Steve Jobs are the exception, and they shouldn’t be our excuse when we’re refusing to deal with a broken education system.

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Student loans have grown persistently at double digit-rates throughout the last decade and college costs have outpaced overall inflation by a significant margin. (Moody’s Analytics). The lack of consumer protections (bankruptcy protection, the right to refinance, statutes of limitations, truth in lending requirements, fair debt collection practice requirements (for state agencies) and state usury laws) have allowed for this unchecked inflation. Students of our generation are facing college costs that are almost 500% higher (http://inflationdata.com/inflation/inflation_articles/Education_Inflation.asp) than they were in 1985 (so to the engineer below, good for you, but your comment is irrelevant; the same terms and prices simply don’t exist today).

Congress also gave unprecedented powers of collection to the industry, including wage, tax return, Social Security, and Disability income garnishment, suspension of state issued professional licenses, termination from public employment, and other unprecedented collection tools that are used against borrowers for the purpose of collecting defaulted student loan debt (StudentLoanJustice.org). Employers are even running credit checks on potential employees, sticking those in high levels of debt or default in a Catch 22; can’t get a job to pay off debt, can’t pay of debt without a job. Try getting to work with a suspended drivers license, or practicing law without your license to practice. Try facing the world when your co-signors social security is on the line, or having your disability checks garnished to pay for an education you can’t use. That’s what student borrowers are facing, with no relief in sight, ever.

Oh and that forbearance? Putting loans on hold and having interest continue to accrue is not relief, even if you use your full forbearance (which by the way, is 3 years total standard, and costs a fee to apply for every time you apply for it). You come back to a loan that has grown even larger and harder to pay. That’s why it’s a joke; it does nothing but delay the inevitable default if you can’t afford your payments. Lenders will not work with you, because they don’t have to. They will get their money regardless. The ability to refinance would be a game-changer for a lot of borrowers, but again, that’s not an option.

Educate yourself of the predatory nature of the student loan industry, the lobbyists, the true costs, and the culture that dictates that to get ahead you have to attend the best school you can get accepted to before you snap back that we have some sort of moral obligation to pay into an industry that is corrupt. The people who got underwater with mortgages, the banks who loaned them the money, they all got away with a hell of a lot more than what students who work hard and try to pay back what they borrowed are asking for. Student loan borrowers face harder terms than gamblers, tax dodgers and even dead-beat dads, who can all declare bankruptcy and walk away from their mistakes. An education is not a mistake, but the predatory payment system that it is fostering has been a life-sentence for many students who were trying to do the right thing and get ahead. We want consumer protections returned so we have a fair chance at paying fair prices for an education that is a pre-requisite to getting a good job in this country. Nobody can reasonably argue that it is not a good idea for the system to be fair.

A Jeffery Blossom…..so do those with credit cards and mortgages. But there are countless people who screw that up. And they have the option to have some type of reprieve or at least bankruptcy protection. To have no options, no way out, and no protection is a scary thing. And I fail to see how you will be picking up the tab if she defaults. If someone spends wild sums of money on a visa card and then declares bankruptcy does that affect you as well?

While I wouldn’t voluntarily default, I do know the stress this places on a lot of people. before you judge unfairly some of the people seeking help, remember, many of us are paying regularly and were up until the economy crashed. Many of us lost high paying jobs we had with our degrees, or took pay cuts to keep our jobs. How would you like it, if every time you had the opportunity to refinance a home, credit debt, or a car, you couldn’t? EVEN IF THE INTEREST rate went down one day later?? Many of us can’t our rates are locked, prohibiting us from refinancing. I would love to be able to take advantage of lower interest rates like I did for my car, and credit cards. However, I don’t have that option. People are justifiably angry, and they want some options, options that are extended TO EVERY OTHER CONSUMER on EVERY OTHER TYPE OF LOAN. Trust me many of us are paying, and will continue to do so, however there are many who REALLY CANT. Bad luck can happen to anyone, and the cushioned complacency you enjoy today could be ripped out from under you tomorrow leaving you with nothing. The are so many extenuating circumstances behind this issue that to lump it under the ‘pull up the boot strap’ mentality does nothing more than exacerbate the anger below the surface. I know that many of these people are doing what they can, as I am sure many of you would do as well. Defaulting, and asking forgiveness might not be YOUR answer, however to forever saddle people with daily compounding interest without an out for refinancing for a lower rate is criminal, and with the job situation being what it is, for ALL FIELDS, as this is touching Doctor’s, Lawyers, Scientists, etc…Payments upward of 800 a month and higher are impossible for many to handle. Then if you figure in displaced workers who had high paying jobs that were making their payments, the worker who was a bit older, and established, that now has to compete for a younger person who will do the job for less, you are compounding the fact that they can’t pay, much less the people affected by disability, divorce, and death. While I don’t expect to change your mind, I can’t let the many good people that I know are wrestling with this every day, be lumped into being called, ‘irresponsible, lazy, entitled, ignorant, and selfish’, any more than I would call any of you an insensitive, heartless, Fascist.

Jeff: The taxpayers only pick up the tab AFTER the person pays one-hundred twenty (120) payments of a portion of their discretionary income of Rep. Hansen Clarke’s (D-MI-13th) bill (H.R. 4170, The Student Loan Forgiveness Act of 2012) passes.

Also, if bankruptcy protections are returned to student loans, then the taxpayer does NOT pick up the tab.

Lastly, it is the lack of bankruptcy protections and mob-like wage garnishment on already inflated principlal balances that allow the US Dept of Education to make $1.22 on every defaulted dollar, so they have no incentive to ask Congress to lower the loan limits, and the colleges thus JACK UP tuition to match the increased borrowing ability, since the influx of easy loan monies distorts the Free Market and bids up tuition — thereby creating a bubble.

Plus, there is monopoly as well: no colleges are reasonably priced anymore — if you see my other comment in this thread, you’d see the many laws broken and stop blaming students — Do you have the personal responsibility to get the facts, and review my other post in this thread?

1. The actual reality is that students are mislead from start to finish on these loans. First, the schools never disclose the true default rates for their students. They always, uniformly quote the “cohort” default rate instead of the true rate, so that when students and their parents ask “how many of your students wind up in default”, they are told something like 5%, when in actual fact, the true rate is about 1 in 4, on average. This is a huge difference that is never corrected. The students also are almost never made aware about the astonishing lack of fundamental consumer protections like bankruptcy, statutes of limitations, refinancing rights, state usury laws, truth in lending, and others from these loans…they typically find out upon graduation, or much later. Entrance counseling is typically garbage information that does nothing to underscore the important, harsh characteristics of these loans. I could go on for hours here, but these are two major points that are extremely important, but never mentioned in the media. 2. This absence of consumer protections, and presence of draconian collection powers make defaulted loans more lucrative for the big lenders, the collection companies, the guarantors, and even the Department of Education. The big lenders like Sallie Mae love to default a loan, get paid full book value, and then come back to collect on a much inflated, defaulted loan. The guarantors, on average, make 60% of their revenue from penalties and fees attached to defaulted loans. The Department of Education makes $1.22 for every dollar they pay out in default claims, and even subtracting very generously for collection costs, only the most fantastical and inappropriate accounting methods (ie using baseless “time-value of money” arguments) can turn this profit into a loss. It is clear that the Department of Education sees defaults as net revenue generators, not revenue sinks, despite claims by “unnamed” Department of Ed personnel to the contrary. These three lending elements comprise the entire lending system, and ALL are perversely incented to prefer defaults. This should and must inform any meaningful discussion on this topic.